Risk Management and Risk Aversion


Risk is part of business and life.

The key to getting a handle on the idea itself of facing it is not total predictability in the nature of risk — it's in being prepared to respond to events as they develop.

When a person or an organization says they are risk averse, they admit they fear change and loss of control.

We all do. There is a fair degree of uncertainty that comes with change, and we get used to the way things are. We know how to deal with "normal" circumstances. We like the way things are because we exert control over how we deal with them.

A new situation, environment, or context challenge us to get into manual pilot again, and that can be uncomfortable, not to mention resource-intensive.

Have you ever experienced an earthquake?

Entertaining the conversation about support for those affected by an earthquake is very different from being the one whose house or town is no longer.

In the end you don't get your house or job back. Those buildings are gone and you were lucky you got away. In fact, you may not even get any help beyond that of your people.

For more than one month, since May 20, my region has been experiencing earthquakes and aftershocks daily. You get out in the streets after the first one, endure some of the tremors afterward with the expectation they will diminish and everything will return to normal.

On May 29, a stronger earthquake delivered a bigger shock than the initial one and more buildings in locations near my hometown of Modena collapsed. The international press wrote only short articles about it.

Who were the first on the scene to help those displaced by the earthquake?

Fellow citizens and volunteers who came to the region from Aquila, the epicenter of its own disaster only a few short years ago. More than anyone else, they were prepared to deal with the risk.

My family was affected. I flew over there for a couple of weeks to lend a logistic hand, share resources, and provide emotional support. Living on the second, third, and ten story of older apartment buildings, they were all able to get out with little more than their lives, repairing to the coast on temporary basis.

So far, 14,000 people were displaced from their homes, many lost their place of business and hundreds of jobs may not come back. This in one of the most productive regions in the country: from Parmesan cheese, to Sangiovese wine, Ferrari, Ducati, Laborghini, to world renown ceramics.

The heart of Italian commerce pulses in Emilia-Romagna. A broken heart, nervous from uncertainty, and yet still industrious and willing to manage, to take risks, to rebuild.

The risk/reward conversation

Crisis like the earthquake are often the catalyst for change. In those cases, it is desirable because necessary to transition from a condition of high instability to one where people can exercise some degree of (real and perceived) control.

We all want the rewards, yet as individuals and organizations are often at odds with risk altogether. Instead of researching, analyzing, and confronting our potential exposures to prepare to deal with them, we treat risk as taboo.

Something we will deal with if we have to (hoping we won't), as opposed to something we should prepare to address.

By definition, risk is the possibility of suffering loss or harm, not the loss itself. When we learn to manage the sources of exposure to it, including our own reactions and experience with certain situations, we can begin to also reap the benefits and opportunity brought about by change and creative problem solving.

When you're holding on to things the way they are, you may be missing a profitable venture or the escape route that may save your life.

Learning to manage risk also means acquiring the ability to see to understand and approach the problems that present themselves with an agile attitude and an open mind.

How's your attitude toward risk? Do you find it easier to deal with it as you gain experience or harder?


[one of the images from Mirandola, one of the towns most affected by the recent earthquakes in Emilia-Romagna. Can you imagine living in those tents in 97-degree weather?]


Valeria is an experienced listener. She is also frequent speaker at conferences and companies on variety of topics. To book her for a speaking engagement click here.

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